The United States needs to ditch its debate over whether to embrace austerity or spend its way back to health by running up deficits, said economist and author Richard Duncan.

Either route will send the country back into recession — or possibly depression — because both plans don't recognize that credit has disappeared and that more underlying changes to government spending need to happen.

When the United States abandoned the gold standard in the 20th century, credit exploded, growing from roughly $1 trillion then to $50 trillion now, according to Duncan.

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Such a credit boom fueled enormous economic growth. But today, the private sector cannot handle any additional debt while the government tries to keep the economy afloat via deficit spending.

Instead, Duncan said the government needs to spend in areas of the economy that can really grow organically and not waste money on programs that just keep consumer spending on life support.

"The government has to continue borrowing and spending to support our economy. This is just a fact of life," Duncan told Newsmax.TV in an exclusive interview.

"But if they continue spending the money wastefully as they’re doing it now, sooner or later they’re going to go bankrupt like Greece," said Duncan, who has served as global head of investment strategy at ABN AMRO Asset Management in London, worked as a financial sector specialist for the World Bank in Washington D.C., and headed equity research departments for James Capel Securities and Salomon Brothers in Bangkok. He also worked as a consultant for the IMF in Thailand.

"So how about this? Let’s learn from our successes," he said.

The success story has been the U.S. military, where government spending was abundant, healthy and focused — more like a carefully executed investment strategy.

"The United States has the global dominance in the military because the United States government invests more in our military than the rest of the world combined," said Duncan, author of "The New Depression: The Breakdown of the Paper Money Economy."

"As a result, we have a global military dominance. So it’s now time to take this very successful government-investment strategy and apply it towards American industry and American power generation," said Duncan, now chief economist at Blackhorse Asset Management in Singapore.

"And if we do invest aggressively in these areas as we’ve done in the military, then we’ll have global dominance in those fields as well," said Duncan.

"The government must continue to spend, but rather than spending it on consumption, they should spend and invest," Duncan added.

"They could generate such massive investment returns ... that we could avoid collapsing into a New Depression. We could all live happily ever after effectively. All segments of society would benefit from that.”

Government spending cannot go away, in that it accounts for about 20 percent of the country's gross domestic product. Consumer spending, meanwhile, drives about 70 percent of the U.S. economy and it needs to strengthen for better days to return.

Draconian public-spending cuts, however, would eliminate public-sector and related jobs to the point that consumer demand and other components of the economy like business investment will suffer and send the economy tanking into depression.

Government spending isn't a bad thing, but wasteful government spending is.

"So in order to grow our way from where we are now, teetering on the verge of crisis, really the only sensible approach is for the government to keep spending. But it must spend in a way that actually generates massive profits rather than just ... too much consumption and waste," Duncan said.

"If the government invests aggressively, we may not return to some sort of 19th century laissez-faire capitalism but we could prosper. We could invest aggressively and establish an absolute, unassailable lead in 21st century industries like genetic engineering, biotechnology, nanotechnology and solar energy. And if we do that, we could lock in another American century and as I said, live happily ever after.”